Facebook’s road to social media domination has been paved over the years not with feats of innovation and efforts at fair competition as the company has claimed but with flagrant user data privacy abuses and conduct aimed at killing any and all competitors, a proposed class action alleges.
The scathing 84-page lawsuit, filed December 3, claims Facebook has grown into the dominating force it is today by wielding its “behemoth-status” to perpetuate a two-part anticompetitive scheme that’s had the net effect of “destroying competition and harming consumers,” especially when it comes to protecting their sensitive data.
“Facebook’s weaponization of user data and its strategy to ‘acquire, copy, or kill’ competitors has been wildly successful at the expense of consumers,” reads the lawsuit out of California federal court. “Facebook’s anticompetitive scheme has lessened, if not eliminated, competition and harmed consumers.”
According to the suit, the first prong of Facebook’s scheme involved the company’s consistent and intentional deception of consumers with regard to data privacy protections. In its early days, Facebook recognized that promising users stringent privacy protocols was necessary for the company to “win the race for market dominance,” the case says. As a result, Facebook’s assurances led consumers to choose the social media platform over competing platforms, per the complaint.
In truth, Facebook concealed both the scope of the data it harvested from users and the ways in which that data was being weaponized to squash competition, the case alleges. Once 2018 rolled around and the veil began to fall on Facebook’s conduct, it was too late, the lawsuit says, and the defendant had “cheated its way to market dominance.”
“Facebook’s deceptions allowed the company to gain and then, over the years, illegally maintain a stranglehold on the Social Network and Social Media Markets …” the suit reads. “And high barriers to entry, including strong network effects and high switching costs, bolstered Facebook’s efforts to prevent actual and would-be competitors alike from challenging its monopolistic grip.”
Supplementing Facebook’s weaponized user data harvesting was what the lawsuit calls the company’s “acquire, copy, or kill” tactics used to exploit users’ data to identify nascent competitors, according to the case. Rather than compete in the market on merits alone, Facebook, the lawsuit says, used the valuable data harvested from users to identify other companies in the field, such as WhatsApp and Instagram, with “the most likely path to meaningful market share gains.” Armed with user data, Facebook took to targeting users’ “preferred alternatives” in the social media game for destruction, relying on the copying of competitors’ innovations before blocking those competitors from accessing Facebook’s data “if they did not sell their business to Facebook first,” the case alleges. What usually came next was the worst case scenario for Facebook’s competitors, the suit says:
“The message to its competitors was explicit: sell at a bargain, or Facebook will go into ‘destroy mode.’ All of this was enabled by Facebook’s deception.”
Per the case, Facebook derives massive economic value from the data it harvests from users, a fact the company itself cannot hide from given its public filings detail just how much each user is worth in terms of average revenue per person. The suit stresses that Facebook’s dominance over competitors has caused users “substantial economic injury” in that they give up something of material value—their data and their attention—when they agree to the defendant’s terms of service in exchange for using the platform.
Absent its anticompetitive scheme, Facebook would have been required under the parameters of fair competition to “provide consumers greater value in return” for their data, but instead “took that data without providing adequate compensation” to proposed class members, the lawsuit claims.
“That constitutes an antitrust injury,” the suit argues. “Through its deception and the acquisitions enabled by its deception, Facebook prevented competition on the merits, and as a result of that reduction in competition, users received less value for their data than they would have received in some form absent the reduction.”
Whereas a number of entities “vigorously competed” to hold space within the social media market, the lawsuit says, Facebook today continues to use users’ data as a tool to bar competitors from entry. What’s left for Facebook users is a “take it or leave it” choice that amounts to not much of a choice, the complaint says, positing that proposed class members can either “accept a Facebook of lesser quality or forgo use of the only social media platform used by more consumers’ friends and family members.”
The lawsuit seeks recovery for consumers’ alleged losses and Facebook’s “unlawful gains” and other appropriate equitable relief to “prevent Facebook from continuing to destroy competition and harm consumers.” The suit also asks for an order for Facebook to submit to “more invasive” third-party audits of its privacy practices, among other relief.
The two classes proposed by the lawsuit aim to include all persons or entities in the United States who maintained a Facebook profile at any point from 2007 up to the date of the filing of the complaint.
In addition to putative class action litigation, Facebook faces what amounts to the full might of the federal government and 48 states, who in separate actions sued the company on December 9 over its apparent abuses of market power.
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